Fed likely to begin taper by December, says Ken Goldstein

Ken Goldstein, economist, The Conference Board, feels it is now a matter of time before the Federal Reserve announces a reduction in its month bond buying program. In an interview to CNBC-TV18 he said he expects the tapering to be commence before current Fed chief Ben Bernanke steps down from office.

Below are the excerpts of his interview on CNBC-TV18 Q: Were you surprised by the non-action by the Federal last night?
A: A little bit surprised that they delayed by perhaps a month or two before they start to taper. Q: So is it your expectation that we might see a taper announcement in the December policy?
A: I would be very surprised if it took longer for the Fed to enter this tapering programme. They want to get into it before Bernanke leaves office and the new chair takes office. Q: Is it possible to argue or would you agree with the argument that some part of what the taper was supposed to do which is cool-off the bond rally in the US as well as cool-off the housing market a bit has already been achieved by the comments made by Ben Bernanke in May, so we have seen a rise in the 10-year yield, we have seen mortgage rates go up as well and hence when the taper happens or when the cut in bond buying happens is now almost semantics?
A: I don’t think it is semantics at all. I hardly think that the aim was to cool-off the housing market as it begins to recover. It was far more to allow the economy to come back, to allow the labour market and the housing market to come back and that that is exactly where the Fed is going. They want to see a little bit more evidence. So, it is clear they are sailing into very strong headwinds.